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A NOTE ON CREDIT MARKET DEVELOPMENT AND HUMAN CAPITAL ACCUMULATION

Published online by Cambridge University Press:  11 March 2013

Wai-Hong Ho
Wai-Hong Ho*
Affiliation:
University of Macau
*
Address correspondence to: Wai-Hong Ho, Department of Economics, Faculty of Social Sciences and Humanities, University of Macau, Av. Padre Tomas Pereira Taipa, Macau, China; e-mail: [email protected].
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Abstract

This paper explores the interplay between credit market development and human capital accumulation in a two-period overlapping-generations economy with asymmetric information under the assumption that young lenders channel credits to young borrowers and acquire education. We find that, at the self-selection equilibrium, lenders will allocate more time to acquire education if the cost of screening borrowers falls. Furthermore, a longer duration of lenders' schooling time suppresses borrowers' incentive to cheat thereby enabling lenders to screen less frequently. Our preliminary cross-country empirical analysis appears to support these findings.

Keywords

Credit Market ImperfectionHuman Capital
Type
Notes
Information
Macroeconomic Dynamics , Volume 17 , Issue 7 , October 2013 , pp. 1525 - 1541
Copyright
Copyright © Cambridge University Press 2013 

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